Dec. 10 (Bloomberg) -- Venezuelan President Hugo Chavez
named a longtime ally with close ties to Cuba his heir apparent
as the cancer-stricken leader prepares for a potential departure
after almost 14 years in power.

Chavez, in a nationwide address over the weekend, said he
was throwing his “irrevocable, absolute” support behind Vice
President Nicolas Maduro to lead his 21st century socialist
revolution should he be unable to carry out his duties. Chavez
made the comments before flying to Cuba before dawn today for
surgery, his fourth in 18 months, to treat an undisclosed form
of cancer that reappeared after winning re-election in October.

Maduro, a former bus driver and union leader, has been one
of Chavez’s closest civilian allies since the then-tank
commander first attracted national attention by leading a failed
1992 coup. While the president’s endorsement carries weight with
Chavez’s base among the poor, a succession battle involving the
more business-friendly, military wing of his movement and
against a revitalized opposition is only beginning as the
strongman’s grip on power weakens.

“In the short-term, Maduro is empowered but we don’t know
what will happen afterwards,” Luis Vicente Leon, president of
Caracas-based polling firm Datanalisis, said in a telephone
interview. “It’s one thing for Chavez, alive and in power, to
exorcize internal arguments, but we’ll have to see how the
infighting can be covered up without him there.”

Call for Unity

The 50-year-old Maduro is one of the president’s longest-serving aides, having been head of the National Assembly before
becoming Foreign Minister in 2006. As Venezuela’s top diplomat,
he traveled frequently to Cuba while building Chavez’s anti-American alliance with countries including Iran and Nicaragua.
He continues to hold that post even after Chavez named him his
vice president following his larger-than-expected victory over
opposition presidential candidate Henrique Capriles Radonski.

“It’s my firm opinion, clear like a full moon,
irrevocable, absolute, total, that in a scenario that would
oblige new presidential elections that you should elect Nicolas
Maduro,” Chavez said Dec. 8, while calling upon Venezuelans to
show “unity, unity, unity” in the days and weeks ahead.

Bonds Surge

While the 58-year-old Chavez didn’t reveal any plans to
cede power, investors are increasingly convinced he will. Yields
on the dollar debt of South America’s biggest oil producer
plunged 60 basis points today to the lowest since November 2007
as investors bet a change in government would augur a reversal
of nationalizations and currency and price controls that have
stoked 18 percent inflation and driven away investment.

Maduro, who today inspected a new cable car transport
system under construction in Caracas, didn’t comment on his
anointment as successor and instead wished Chavez a speedy
recovery.

“Chavez has been and is a father for us,” Maduro said.
“He’s educated us in the fight, in anti-imperialism and in the
ideas for a socialist society.”

Pre-recorded images broadcast on state television today
showed Chavez kissing a crucifix and waving to members of his
cabinet as he boarded a plane at Caracas airport.

‘Good Hands’

“I’m leaving and even though I’m not handing over the high
political command, I know I’m leaving it in good hands,” Chavez
told top military generals at the presidential palace earlier.
“There’s Nicolas,” he said, gesturing to Maduro, who was sat
next to him.

In addition to Capriles, who was favored to defeat any pro-government candidate in polls taken earlier this year, Maduro
also faces a potential challenge from another key Chavez ally:
National Assembly President Diosdado Cabello. A former
lieutenant who fought alongside Chavez in the 1992 army
rebellion against then-President Carlos Andres Perez, the 49-year-old is in line to become caretaker president should Chavez
fail to take the oath for a third, six-year term on Jan. 10.
Under the constitution, he’d have 30 days to hold elections.

Chavez’s decision to break a 21-day silence and return last
week from Cuba, where he’s been undergoing hyperbaric oxygen
therapy, may have been prompted by a need to rein in Cabello,
said Vladimir Villegas, who served as Maduro’s deputy foreign
minister between 2006 and 2007 before leaving the government in
protest over Chavez’s policies.

Military Connections

Cabello’s military connections afford him “a lot of power
although he’s more feared than loved both within and outside the
government,” Villegas, who writes a column for the Caracas-based daily El Nacional, said in phone interview.

In a sign of unity, Cabello sat next to Chavez and Maduro
as the president announced his endorsement over the weekend.
Still, underscoring how messy any succession battle could become
in the polarized country, he held out the prospect of violence
should Chavez step down.

“Even the opposition should be praying that Chavez gets
better,” Cabello said on state television after Chavez’s
address. “He is the guarantee of peace in the country.”

Thousands of Chavez supporters gathered in squares across
Caracas yesterday to pray for their president as he prepares to
leave for Cuba, while leaders across the political spectrum in
Latin America sent message wishing him a quick recovery.

Chavez has reduced his public appearances since being re-elected, fueling rumors that his health was worse than he was
letting on after he claimed during the campaign he was “totally
free” of cancer.

Opposition’s Chances

Chavez’s decision to name a successor also increases the
importance of regional elections Dec. 16, where the man Maduro
replaced as vice president, Elias Jaua, is pitted against
Capriles for the governorship of Miranda state. A win for
Capriles would boost his chances of holding together an unruly
anti-Chavez alliance and mounting a successful presidential bid,
while a defeat would be “disastrous” for the opposition’s
chances, said Leon.

Polls before this weekend’s announcement showed mixed
results, with one taken Nov. 21 to 26 by Caracas-based polling
companying Ivad predicting a landslide win for Capriles and
another taken this month by Hinterlaces favoring Jaua by 49
percent to 44 percent.

Capriles, while wishing Chavez a swift recovery yesterday,
questioned his decision to name a would-be replacement.

‘Not Cuba’

“Venezuela doesn’t have succession,” Capriles, 40, said
in comments broadcast on Globovision. “This is not Cuba nor is
it a monarchy that has a king. Here in Venezuela, when someone
leaves a position, the people get the last word.”

One way Chavez may try to solidify backing for Maduro is by
pushing for a constitutional amendment to allow him to serve out
the remainder of his third term, said Leon. Under the nation’s
charter, elections must be held within 30 days if Chavez steps
down within the first four years of his new term. Chavez, before
going to Cuba last month, ruled out any constitutional reform.

“Maduro is a guy with lots of political experience and it
would be a mistake to underestimate him -- that’s why Chavez
chose him,” said Villegas, who as a teenager attended the same
high school as Maduro in southern Caracas. “Chavez wants
someone who can guarantee continuity to his fundamental ideas
for the country but also a person who as a former union leader
is capable of negotiating.”

While Maduro could scale back some of Chavez’s more radical
policies he’s unlikely to be market-friendly and will likely
spook investors, said Bret Rosen, a Latin America debt
strategist at Standard Chartered Bank in New York. Bank of
America-Merrill Lynch expects Venezuela’s economy to contract
3.6 percent next year as a result of an expected devaluation of
the bolivar needed to close a fiscal gap widened by Chavez’s
pre-election spending boom.

‘The Devil You Know’

“Maduro is not Chicago School of Economics by any
stretch,” Rosen said in a telephone interview. “Sometimes the
devil you know is better than the one you don’t.”

By contrast, business leaders see Cabello as more of a
pragmatist than members of the civilian, pro-Cuban wing of the
government that Maduro leads. In 1999, as Chavez’s chief
telecommunications regulator, he ended Cia. Anonima Nacional
Telefonos de Venezuela’s monopoly on fixed-line phone service.

Whoever has the upper hand, the time for Chavez to step
aside appears to be nearing.

“Whatever happens with the operation, Chavez is clearly
signaling that he won’t be able to complete his term,” said
Villegas. “Everyone is starting to see that Chavez is becoming
a thing of the past.”